Question 1

If inflation increases from 2% to 5%, the money demand curve will:

Accepted Answer

A) remain constant. 
B) remain constant, but the quantity of money demanded will decrease. 
C) shift to the left. 
D) shift to the right. 
A) remain constant. 
B) remain constant, but the quantity of money demanded will decrease. 
C) shift to the left. 
D) shift to the right.

Question 2

If the money supply decreases by 10%, the aggregate price level will remain constant in the long run.

Accepted Answer

A) True 
 B)False

Question 3

Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 4

If the economy is at potential output and the Fed decreases the money supply, in the long run real GDP will likely decrease.

Accepted Answer

A) True 
 B)False

Question 5

If requirements for having a credit card become stricter, so that fewer people qualify for one, the demand for money will decrease.

Accepted Answer

A) True 
 B)False

Question 6

The liquidity preference model uses the demand for and supply of money to determine:

Accepted Answer

A) GDP. 
B) the price level. 
C) the interest rate. 
D) nominal output. 
A) GDP. 
B) the price level. 
C) the interest rate. 
D) nominal output.

Question 7

When nominal wages increase, the short-run aggregate supply curve:

Accepted Answer

A) shifts to the right. 
B) shifts to the left. 
C) remains constant. 
D) disappears. 
A) shifts to the right. 
B) shifts to the left. 
C) remains constant. 
D) disappears.

Question 8

The money demand curve is shown in a graph with the interest rate on short-term assets on the vertical axis. Why use this short-term interest on the vertical axis and not the rate of return on other financial assets?

Accepted Answer

An individual primarily holds money to m

Question 9

If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:

Accepted Answer

A) zero. 
B) 0.02%. 
C) 1%. 
D) 2%. 
A) zero. 
B) 0.02%. 
C) 1%. 
D) 2%.

Question 10

An increase in the aggregate price level _____ the demand for money.

Accepted Answer

A) increases 
B) decreases 
C) does not affect 
D) left-shifts 
A) increases 
B) decreases 
C) does not affect 
D) left-shifts

Question 11

An increase in the money supply that will decrease interest rates causes a shift of the:

Accepted Answer

A) aggregate demand curve to the left. 
B) aggregate demand curve to the right. 
C) short-run aggregate supply curve to the left. 
D) short-run aggregate supply curve to the right. 
A) aggregate demand curve to the left. 
B) aggregate demand curve to the right. 
C) short-run aggregate supply curve to the left. 
D) short-run aggregate supply curve to the right.

Question 12

The fact that many stores in the United States have found it economical to accept credit cards has:

Accepted Answer

A) increased the demand for money. 
B) decreased the demand for money. 
C) increased the demand for credit card transactions but has not affected the demand for money. 
D) decreased the demand for credit card transactions but has not affected the demand for money. 
A) increased the demand for money. 
B) decreased the demand for money. 
C) increased the demand for credit card transactions but has not affected the demand for money. 
D) decreased the demand for credit card transactions but has not affected the demand for money.

Question 13

If the economy is operating at potential output, how does a contractionary monetary policy affect short-run and long-run prices and real output?

Accepted Answer

If the Fed decreases the money supply, i

Question 14

If the economy is at potential output and the Fed decreases the money supply, in the short run the likely result will be a decrease in investment and a decrease in consumption.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following events will NOT decrease the demand for money?

Accepted Answer

A) an increase in the aggregate price level 
B) the advent of ATMs 
C) the ability of the stores to process credit cards 
D) a fall in real GDP 
A) an increase in the aggregate price level 
B) the advent of ATMs 
C) the ability of the stores to process credit cards 
D) a fall in real GDP

Question 16

If the economy is at potential output and the Fed increases the money supply, in the LONG run the price level will likely:

Accepted Answer

A) fluctuate randomly. 
B) remain the same. 
C) decrease. 
D) increase. 
A) fluctuate randomly. 
B) remain the same. 
C) decrease. 
D) increase.

Question 17

Expansionary monetary policy works by decreasing consumption, allowing other sectors of the economy to spend more.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the inflation rate is 2.5%. The unemployment gap is 2%. Use the Taylor rule to estimate the target Federal funds rate.

Accepted Answer

According to the Taylor rule:

Question 19

The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. The appropriate open market action is to _____ Treasury bills to _____ money _____.

Accepted Answer

A) sell; decrease; demand 
B) sell; decrease; supply 
C) buy; decrease; supply 
D) buy; increase; demand 
A) sell; decrease; demand 
B) sell; decrease; supply 
C) buy; decrease; supply 
D) buy; increase; demand

Question 20

The introduction of ATMs:

Accepted Answer

A) increased the demand for cash because it made cash easier to get. 
B) decreased the demand for cash because it reduced the cost of moving from other assets into cash. 
C) did not change the demand for cash because it is proportional to the price level. 
D) did not change the demand for cash, as ATMs do not affect public spending habits. 
A) increased the demand for cash because it made cash easier to get. 
B) decreased the demand for cash because it reduced the cost of moving from other assets into cash. 
C) did not change the demand for cash because it is proportional to the price level. 
D) did not change the demand for cash, as ATMs do not affect public spending habits.

If inflation increases from 2% to 5%, the money demand curve will:

If the money supply decreases by 10%, the aggregate price level will remain constant in the long run.

Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

If the economy is at potential output and the Fed decreases the money supply, in the long run real GDP will likely decrease.

If requirements for having a credit card become stricter, so that fewer people qualify for one, the demand for money will decrease.

The liquidity preference model uses the demand for and supply of money to determine:

When nominal wages increase, the short-run aggregate supply curve:

The money demand curve is shown in a graph with the interest rate on short-term assets on the vertical axis. Why use this short-term interest on the vertical axis and not the rate of return on other financial assets?

If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:

An increase in the aggregate price level _____ the demand for money.

An increase in the money supply that will decrease interest rates causes a shift of the:

The fact that many stores in the United States have found it economical to accept credit cards has:

If the economy is operating at potential output, how does a contractionary monetary policy affect short-run and long-run prices and real output?

If the economy is at potential output and the Fed decreases the money supply, in the short run the likely result will be a decrease in investment and a decrease in consumption.

Which one of the following events will NOT decrease the demand for money?

If the economy is at potential output and the Fed increases the money supply, in the LONG run the price level will likely:

Expansionary monetary policy works by decreasing consumption, allowing other sectors of the economy to spend more.

Suppose that the inflation rate is 2.5%. The unemployment gap is 2%. Use the Taylor rule to estimate the target Federal funds rate.

The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. The appropriate open market action is to ___ Treasury bills to _ money ___.

The introduction of ATMs:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 15: Monetary Policy

If inflation increases from 2% to 5%, the money demand curve will:

If the money supply decreases by 10%, the aggregate price level will remain constant in the long run.

Janet Yellen is the chair of the Board of Governors of the Federal Reserve.

If the economy is at potential output and the Fed decreases the money supply, in the long run real GDP will likely decrease.

If requirements for having a credit card become stricter, so that fewer people qualify for one, the demand for money will decrease.

The liquidity preference model uses the demand for and supply of money to determine:

When nominal wages increase, the short-run aggregate supply curve:

The money demand curve is shown in a graph with the interest rate on short-term assets on the vertical axis. Why use this short-term interest on the vertical axis and not the rate of return on other financial assets?

If a checking account has an interest rate of 1% and a Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is:

An increase in the aggregate price level _____ the demand for money.

An increase in the money supply that will decrease interest rates causes a shift of the:

The fact that many stores in the United States have found it economical to accept credit cards has:

If the economy is operating at potential output, how does a contractionary monetary policy affect short-run and long-run prices and real output?

If the economy is at potential output and the Fed decreases the money supply, in the short run the likely result will be a decrease in investment and a decrease in consumption.

Which one of the following events will NOT decrease the demand for money?

If the economy is at potential output and the Fed increases the money supply, in the LONG run the price level will likely:

Expansionary monetary policy works by decreasing consumption, allowing other sectors of the economy to spend more.

Suppose that the inflation rate is 2.5%. The unemployment gap is 2%. Use the Taylor rule to estimate the target Federal funds rate.

The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. The appropriate open market action is to _____ Treasury bills to _____ money _____.

The introduction of ATMs:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

The Federal Open Market Committee has decided that the federal funds rate should be 2% rather than the current rate of 1.5%. The appropriate open market action is to ___ Treasury bills to _ money ___.